of course the third quarter hasn't been rose ciy for all st. dow transports would normally signal a red flag for the economy. we'll talk more about the transports and what they're telling us at 6:40. we'll also focus on the economy with the man who is charged with officially calling recessions and the end of those recessions. james poterba will be here at 7:30. and our corporate story of the morning, smartphones and mobile devices. apple launches the new iphone 5 in 22 more countries today and this comes after blackberry posted better than expected quarterly results after the bell last night. still, it is an uphill climb for this company. we'll be talking to research in motion ceo. and plus we will welcome today's political news maker, senator rand paul, one of the nation's best known tea party members. and by the way, in case you went to sleep early last night, the official nfl refs were back on

the field. get this, they got a standing ovation as they took the field. the ravens beating the browns 23-16. we will have more on the game and on what's happening in sports at 6:20 eastern time. first andrew has the morning's top business headlines. on the global markets agenda, results of an audit of spanish banks will be released today. this will reveal the amount needed to capitalize the country's beleaguered banks. audit results come one day after spain announced its 2013 budget and steve sedgwick will be joining us live with more on all of that in just a few minutes. france is also announcing its budget plans today. president hollande said that the budget will be the toughest in 30 years. government needs to find about $39 billion of spending cuts or deshl resources to meet its 2013 deficit target. and fitch is lowering its 2012 growth forecasts both for china and india.

citing deteriorating outlook of the global economy. so not a great way to start the morning. >> no, not great, but i like seeing what we did -- i saw ge and i was going to tell whoever thinks that we need to kiss up to them still -- >> minority partner. >> they are. but comcast would have been a better -- or we could have done both. and did i see something that it had first quarter, second quarter, third quarter? what do i need in the fourth quarter to get to the 30%? do we hahave that anymore? is that gone? no, they don't have it. >> i saw the dow, s&p and nasdaq. >> what did it add up to? adds up to like 15 or so. >> i just saw for this quarter. >> oh, it didn't show first quarter, second quarter -- >> no. >> there are corporate

headlines. people started getting plaq blackberries? >> they beat expectations. >> they lost money, they beat expectations. >> but they added subscribers. >> subscribers in developed countries. the point is a developing -- in the developing countries, i mean -- >> that's us. >> no, developing. >> okay. >> so in markets where -- they're getting blackberries because they're cheaper. >> remember we had him on when he was first named and he said what he thought they will rae needed was a new chief marketing officer. >> he had a rough beginning, rough opening week. it was a narrower than expected loss as you just head, but still a loss. but the shares did jump in late trading. and among the catalysts, analysts point to kapgss that the company will have plenty of

cash to ramp up production of its new blackberry 10 devices. we'll talk to an analyst who covers the company. and then as becky managed, the ceo live with us at 8:00. apple iphone 5 will roll out worldwide today with its io 6 operating system. they couldn't coordinate the two? >> all of the phones have an eo 6. >> but yet it's the iphone 5. >> you're saying it should be called iphone -- i got you. >> sorry. where is apple? anyway, apple has come down a little bit recently, but not much. and watch shares of nike if you want to. i'm not ordering you to. but if you wouldn't mind. the company posting better than -- do you think we should tell people what to do? >> well, it sounds very

authoritative. >> all right. listen. you better watch nike today or you'll have hell to pay. better than expected earnings. orders in china fell for the first time in three years. china's been a growth engine for the world's largest sports wear maker. apparently there's something like 4 billion feet in china. >> 2.8. >> only 1.4? >> yeah. i think it's 1.4. >> if you put a pair of jordans on all those feet, it adds up. >> 3 billion feet almost if we round up like howard dean. >> i can't believe you caught him on that. and that he knew he was doing it and he was waiting for you to catch him. >> because he's done it with jobs and everything like that. he's slick. he ran the dnc. it's second nature. >> he laughed when you called him out. he's like, all right, you got me. >> it's second nature for all politicians. >> that's right. in some of our other new,

british regulator outlining a complete overhaul to libor planning to mend it, but not end it. bob diamond resigned after it was reveal that had his bank was fiddling with the rate. it was an industry wide problem that tore the very fabric that our financial system is built on, that's the quote on that. he accused the british banksers association of having clearly failed. and he is now inviting other groups to take over the process. and tim geithner is calling for the new u.s. financial risk council to consider reforms for money market funds. he wants council to suggest reforms to the sec. this comes a month after sec chair mary shapiro announced that she had failed to win enough assume at her agency to advance reforms. what's amazing about it? >> amazing that this is like a big if you could say initials on the show, if key give the finger to the sec. >> because you can't get it done? >> basically mary shapiro

couldn't get it done, he says screw you, i have this other thing going on here. aim taking over. basically is what's happened here. so there's this whole sort of -- >> what's the real problem with the money market funds? >> there's no collateral. it's one of the most und underregulated businesses out there. and a run can happen much quicker than anything else. >> people think it's fdic insured. >> i thought it was after the last crash. >> that's a component of the problem. long term, the issue is that if you make it as costly as it probably ultimately will need to be to be a sort of safer system, probably put them out of business. it's barely worth it now. so you have the entire mutual fund industry just at the throat of the schtec. >> good for him for pushing

ahead with it. >> in fairness to mary shapiro, she pushed to do it, but there was so much political back wlash. both who is democratic in temps of the appointees and who was doing what. >> what was sheila bair's main contention about geithner? what did she not like about him? >> she also mentionses me in the book. >> she didn't like you either. i was going to get to that. we were talking about geithner, so i needed to go there -- it's a stepping stone. >> her contention is that he was out to protect the banks, that he was in the pocket of wall street. that he was out to protect citigroup much more so than he was out to protect the taxpayer. that's her -- >> and what was your problem? >> that i was playing along. i think the argument was there was this ppip program, not to complicate things. >> you said pee-pee. >> there was an investment

program and i added a lot of leverage to the system. it was something ultimately the treasury did not want to do and maybe she thought i was in cahoots with them, which i wasn't, but who knows. >> she said that your column was part of the problem. >> and this was a rn kocornerstf one of the things she wanted to do. >> she doesn't like anyone. >> she's not a fan of most in this particular book. she's secretaryi insettling sco right. every single executive somehow gets -- >> i have to read this. >> you got another book in you? >> somewhere deep inside. >> i'm worried you have scores to settle. >> i have a book called inside the box. >> that's good. >> thinking inside the box. >> that's good. >> pretty quick. almost like he really does have something. >> behind the box. i don't know. something like that. >> the thing with geithner, though, it's actually really good that he's doing this and he's getting so much grief for not having pushed harder on

libor with all of this. why would you expect him to do anything else. he's in the middle of wading through the hail storm or not following up and screaming louder about the problems you saw then. if you think this is a real problem, good. follow up. >> hasn't been enough attention on on the issue. >> is that the expression, hail storm? >> hail storm -- >> i mean, you they what it is. most people, if we weren't on tv, you wouldn't say hail storm, but is that what they say, hail storm? >> i don't know. i may have just made that up. >> so you didn't have to say shih tzu storm. right? going through a hail storm. but really it's a -- there really has never been one of those. but you know it rains cat s and dogs. it could rain shih tzus. >> that's carl's dog. more rat than dog really. >> lucky is really cute. >> we'll get some e-mails. there he is. there's lucky. >> in a new york apartment,

that's a big dog. right? based on your living space, it takes up more than a german shepherd would p. >> i'm thinking about adopting a squirrel. >> and putting a little leash on it. let's take a look at the futures because it is the last trading day of the month. you'll see right now that the futures are down about 12 points, s&p 500 down about 1.8. and if you turn to see what happened in europe because obviously europe has been leading us around again for the last several days, in europe you do see green arrows both in london and germany. shanghai the market up by 1.4%, nikkei down by 79 points. oil prices the other big story that we've been following all week long. this morning they're up 43 cents to 92.28. i don't know if you saw the

story on cnbc yesterday about how an oil trader who was drunk a couple years ago back in 2009 was the reason that prices spiked overnight. he blacked out and didn't realize he broke 7 million contracts or something overnight. kept bidding it up. but let's take a look at the ten year note. at this point ten year yielding 1.625%. dollar has been interesting this week as it's gained always bit against the euro, but today that trend has turned around. 1.294 is where the euro is trading. up against the yen, down against the swiss franc. and gold prices are up by $3.50. $1784 an ounce. >> all day we are looking ahead to the fourth quarter. we begin with michelle caruso-cabrera and what to look for in europe. >> cnbc's chief international correspondent, here's what to watch for overseas in the fourth

quarter. mid october, the transition to a new government in china. only happens every ten years. it's been delayed racked with controversy and prevented leadership from focusing on the economy as much as it might have otherwise. in europe, spain has 20 billion euros of debt they need to roll over from october 29th lieu 31st. that could be decision point as to whether the country seek as bailout. and then sometime late in october, maybe ennovember, we find out whether or not greece gets a new round of money. what if they don't. that's your fourth quarter channel check for key overseas events. >> now to spain. steve sedgwick is standing by in madrid. >> this is act 2 today of what is a two act drama. yesterday of course we had the budget. european commissioner could have written it. it was basically something brussels could have written themselves because it was all about conditionality, about moving towards a single market,

better regulation, better scrutiny, budget deficits. tough budget deficit with 43 new rules in it. let's see how this works out. today, though, today is all about the banks. and today i'm just wondering following on from the chihuahua we saw earlier and if we're being sold a pup on the spanish market story because the banks will be told by the big four auditors that they potentially have shortfalls of capital of 62 billion euros. that's okay, though, because that's well within the parameters of the 100 billion euro credit line coming from the center of europe. but is this stress test strenuous enough, is it just a snapshot in time? because we still have a falling housing market. price down between 20% and 30% and no sign yet of that house price falls stopping. we've got deposit flight. if more deposits are taken out, they need more capital. there are concerns also about bad date. the latest figures from the bank of spain with 9.9% of debt in

arrears. that's 169 billion euros. and then the thorny question of the bad bank. you may say they're all bad banks, but the bad bank is actually where are they going to put all their toxic assets. that's what they have to do in return for getting this credit line from the europeans. except no one's exactly said at what level the assets will be transferred at p. if we take for example what the irish put into their bad bank a couple years ago, they put them at a 58% discount, at the moment only a 40% discounts. do they have to mark them down another 18% and does that mean even more of a capital shortfall? just worried we're being sold a great big story today. back to you. >> yeah, speaking of the irish, i think we'll talk about stanford now, steve, because you saw stanford lost. coming up, we will talk some football and golf. ryder cup starts today. he wasn't talking about the fighting irish? oh, the actual irish.

i wasn't paying attention really. a r.i.m. analyst tells us what he makes of last night's report. and we'll also -- aren't those kids at stanford too smart to be really good at football? when has harvard ever been ranked? impossible. >> harvard is good at hockey. >> that makes sense. >> why? >> i don't know. [ male announcer ] for the dreamers... and those well grounded. for what's around this corner... and the next. there's cash flow options from pnc.

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time spoke forts news. the nfl refs were back on the field last night . joe flacco had 356 yards as baltimore beat the browns 23-16. baltimore improves to 3-1 with its ninth straight win over cleveland. >> cleveland is 0-4, right? >> i don't know. >> that was neel kashkari, he was winie inwhining they were 0 so now they're 0-4. >> in illinois today, europe begins its defense of the ryder cup. four matches this morning and four more matching in the afternoon. rory mcilroy and graham mcdowell within the first to tee off against jim furyk and snedeker.

>> so we're hoping for him. no tiger/rory match-up today. and you remember somebody -- norman said that rory mcilroy intimidating tiger. nobody intimidates tiger. >> you would. >> i don't intimidate tiger or his caddie. he got rid of that thug. i think he's now with adam scott. but then the guy said adam scott won some average tournament and he said it was the greatest caddying game. i think he's a kiwi, isn't he? anyway, now today's weather forecast. alex wall larks i was trying to find out when on nbc the ryder cup starts today. >> i'll find out. >> alex, you're a renaissance man. you don't just know about rain, do you you? is there rain in illinois? how about that? >> it looks like the rain will be sinking just south of illinois, maybe a few showers this morning.

but later today should be a little drier. >> who is it on today? >> espn today. #:00. >> never mind. 8:00 a.m. somewhere else, not 8:00 a.m. here. >> central time. >> nothing happens in the first hour, alex. don't turn it on until 9:00, please. anyway -- what else is going on? are we fully in -- i've heard that fall begins in september. we're already in fall, aren't we? >> we are smack dab in it, yeah, we hit it last weekend. so we're right in it and we certainly have felt it in some areas. earlier in the week, the mornings were certainly chilly out there and we'll keep it coolish in the upper midwest north of this boundary. south of, still feeling summer like with 80s and even 90s. but this morning we're tracking rain, seeing it mere moving across the northeast, now getting in to the boss tton are.

that's shifted off towards the north. more rain as we track into the ohio valley and even back in parts of the plains. panhandles of oklahoma and texas and the west texas, as well, seeing some of those storms. we'll keep that threat for the day moving across the northeast, looks like a wet one in nyc. back to you. >> i'll have to bring my umbrella. back to blackberry maker research in motion, tim long is an analyst and here to talk about this report last night. which sent the stock up. still revenues down 31%. are you excited, is there something to be excited about in this story? >> this is the first quarter in several that there's actually been something positive to talk about. so they were able to increase the subscriber base, phones a little better. >> they're losing money. they're losing revenue. what's -- >> a $3 billion company instead of a $70 billion company. we still talk about it like it's

a $70 billion company. >> they sold 6.9 -- >> bmo is canadian. should be your big sar company. >> i'm not canadian, we're canadian. >> so they sell 6.9 million phones in a quarter. apple sells 5 million phones in a weekend. how you can be excited? >> there's a long way to go for r.i.m. i'm not very excited about it. i think the quarter that just happened and the quarter we're going into don't really matter. these are the old products they're selling. early next year they'll come ultimate out with blackberry 10. that's the phones that will catch them up. >> and we were joking about are we all -- i carry around a blackberry, too. are we wading in some type of different generation? those phones are being sold to the extent they're selling well, they're selling well in emerging markets. >> yeah, the real r.i.m. strong holds are emerging markets, but they're still holding on to some corporate. but if you look at the developed

world, the u.s. and europe, it's enterprised, it's people that like keyboards and it's teenagers that like bbm. >> how long does the emerging markets place still work for help? let's take blackberry 10 and put it on the side. how long does the other piece of it still work? >> i think they're in a little bit better position than say a nokia because what nokia really got hurt by was having a lot of exposure to china where you have the chinese local companies making a low end android phone. they have not yet permeated the rest of the world, so r.i.m. has been a little inside lated. so if you're in indonesia, you don't have a lot of options for a $100 smartphone. >> let's spin this forward. blackberry 10 comes out. it's a cool phone. but so is the microsoft phone. and nobody wants to touch it. >> they don't have the ecosystem. they'll struggle with the ecosystem. so we're expecting both windows and blackberry 10 will likely

fail. >> so if that is true, where does this stock go, what happens to this company? >> the would none other thing b has is with the 80 million subscribers is they're still getting $4 and change per sub per month. so that was a billion dollar last quarter at 50% margin. so they have value in their network that operators are paying them. now, of course when the subs start going negative and there's pressure on that pricing, that billion dollar as quarter starts to wither away rather quickly. >> thank you for this. doesn't sound like a positive story, but we'll be talking to the ceo a little later. have you got a question for him? >> yeah, i just would like to see when the phones are actually coming. what will they look like. >> if you were a tree, what kin of tree would you be. >> in fact research in motion authorize sten hines will be our special guest at 8:00 a.m. but first the tools of the trade, what you need to know about an the start of the fourth square.

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here are the third quarter returns heading into the final session of the quarter. dow up 4.7%, s&p 500 up 6.2% for the quarter. and the nasdaq has a gain of nearly 7. throughout the morning we'll focus on what the fourth quarter could hold even though this quarter -- >> we should figure out the first, second, third quarter gains. >> i could figure that out. i think we're up between 15% and 20% on the -- >> i'll take a look. >> on the s&p. andrew, what do you think, what's the -- you like blackberry. that's our big corporate story

today. that's a tough one. >> or we could turn -- the tim geithner story. >> i think the tim geithner is much more interesting than most organizations are giving it credit for. >> i'll have to listen, i guess. if you talk about it again, i'll listen. >> there was a great article yesterday about the business of college bars. college bars going out of business because college kids who used to go to bars to hook up are now having apps, so they pregame at home or in their frat house or whatever and then they show up at the bar, maybe if they shup the aow up at all, li last hour. a great quote. these kids -- this is from a former owner who went out of business. college bar owner. these kids today won't even pay for a $2 drink. they buy a bottle of southern comfort, show up in time to try to get laid, but they just end up throwing up in my men's room

and i get reprimanded because it looks lying i'm the one who let them get drunk. >> this squawk ward moment has been produce the to you by andrew ross sorkin. >> everybody yells at him because kids watch our show. >> i didn't know you were going read so wisfully like you missed out -- >> i wasn't wistful. >> it sounded wistful to me. >> get me out of here. >> becky is in horror. >> are you trying to top me? they picked up my -- idiots at business inside, they don't care about facts. i did not wear boxers with shorts that had a lining. they make lululemon's pants that have no lining that you can't wear -- >> this squawk yaward moment ha been brought to you by joe kernen. >> they don't check their facts. >> and now that we've gone to the gutter, all day here -- >> lucky to have a job, i think. >> we're looking ahead to the

fourth quarter. a preview on supreme court with a number of high profile business cases on the docket. take a listen. >> here's what to watch for in the legal sector in the quarter ahead. the stream court gets back to business on monday. 48% of the cases this term focus on business and investor issues. first up, at issue will american courts remain a place where any corporation can be sued for alleged human rights violations anywhere in the world. and one of several class action cases could lead to fighter restrictions on lawsuits including whether they're tried in-state or generally more business friendly federal court. millions of dollars are at stake. and finally, los angeles county is taking the lead in what could be a landmark environmental case. does the clean water act make local governments responsible for controlling storm water pollution runoff. that's your q4 channel check for

cn cnbc. >> now to our trading block to find out what could be ahead for the investors. joining us is scott bower, senior market strategist from trading advantage. we've been trying to figure out why wr we are for the year. where does it stand roughly for the first three quarters? >> obviously everything is pretty good right new. i'd say the trend is still pretty bullish to the up side. the reason i say that is going into corporate earnings coming up here, we've seen so much that has already been lowered. so much guidance that has been lowered that it looks like the beats coming forward will far youth weigh the misses. so that may carry us through the election time, but let me tell you something, with volatility the way it is and the vix being where it is, traders and investors are able to stay in this market, stay long in this market, but still buy cheap protection. so instead we really see a breakout of sorts in the fear index, in the volatility, i really think that the trend is

still to the up side. >> so you think the trend is to the up side even though in the fourth quarter we have the election, the fiscal cliff, europe popping up again and all these concerns about china, you put them all on the side burner? >> until something absolutely comes to the forefront, kryes. in f. we g if we get through the election and the fiscal cliff is still on the docket and in peril, that's a different story. but until -- it's almost like the little boy that cried wolf. until something actually happens, these guys down here and really anybody in the marketplace can buy such cheap protection. there's no reason really not to stay in the market. maybe in some of the more defensive plays, but no reason not to stay on the market. >> after what we were talking about, scrimping seems like a bad move. >> i agree. i have a freshman down there in college right now.

>> tell him not to scrimp on protection. >> andrew is exactly right, though. >> don't buy that cheap protection. anyway, scott -- he heard. he's not even embarrassed. >> not at all. >> you're tweeting about it now. >> i just wrote my poapologies somebody who wrote and said we have kids watching. >> moving along -- >> and you justified it by saying that it's written-will you were just reading from the "new york times." as if that makes it okay. comments, questions about anything you see -- and you're sweating now. if you have comments or questions about anything you see here, even mail us squawk@cnbc.com. coming up -- and it's only under one side. i don't understand that either. transports down this quarter. normally that would signal a red

flag. we'll ask if that's true. next. [ male announcer ] how do you trade? with scottrader streaming quotes, any way you want. fully customize it for your trading process -- from thought to trade, on every screen. and all in real time. which makes it just like having your own trading floor, right at your fingertips. [ rodger ] at scottrade, seven dollar trades are just the start. try our easy-to-use scottrader streaming quotes. it's another reason more investors are saying... [ all ] i'm with scottrade.

welcome back. in our headlines today, california schools and employers are now banned from social media snooping. states governor signed into bills in to law and the le legislation gives protection from employers who might ghabd their log-in credentials to social media platforms. employers are also barred from firing or disciplining those who refuse to give up any

information related to their social media accounts. also colleges or universities won't be allowed to demand passwords or other identifying information from students, prospective students or student groups. dow jones up 4.7% this quarter, but transportation average is down. joining us is partners managing director and senior research analyst. i've watched transports for so long and i've finally decided that maybe it's different this time. maybe not as much retail. so much high frequency trading. in the past, if the transports are headed a different way that portends bad things. do you still think that holds? >> i do. the dow transports have the reputation for predicting the economy, the overall market for a basic reason. it's not that the stocks are

somehow only in addition sent, it's the pulse whap's happening in the economy. you see a peck up in goods flow, you see a peck up in asset utilization rates. asset turnover which turns in to better financials which oh, by the way portends better stock price. we're having the exact opposite thing happen right now. goods flow is all contracting. or at least decelerating. so we're seeing eight company, eight major transports have already pre-announced they won't make their earnings because they're seeing lower asset utilization rates. >> what are the eight? >> fedex, u.p.s., norfolk southern, land star, forward air, warner. the list goes on. it's just not pretty. and all of the goods fle is decelerating. >> normally it's like oil prices went up, their margins are getting squeezed.

and you don't assume oil prices going up that you're going to see a global slowdown necessarily. so you can just look at it and say it's just a bottom line margin problem, but this seems to be more than that. >> it certainly is. certainly oil is part of it, the applies price of fuel marching up is part of it. >> china is a bigger part. >> it's a much bigger part. we downgraded both of the air freight stocks u.p.s. and fedex back in early july and said there's no way they can make their number and of course they both have missed since. but the bottom line is that you're looking at international air freight has gone negative outbound from the u.s., negative in the transpacific and asia pacific, despite all of the tech launches, we're still seeing negative air freight. you look at import container volume, it's the worst it's been since 2009. and so that begs the question if the consumer really shows up

this holiday, is there going to be anything to buy. the export container volume has gone negative. i understand why the europeans are buying less from us, but that means lower u.s. manufacturing corporate income. it means lower u.s. manufacturing worker income which means lower spending. when you look at rail volume, rail volume overall is down 3%. core chemical volume down even worse. and that means lower domestic manufacturing. because why? because it's hard it make anything or assemble anything without consuming some form of chemical cal. we're just not seeing a fall peak in shipping yet. >> really pretty staggering.cal. we're just not seeing a fall peak in shipping yet. >> really pretty staggering.al. we're just not seeing a fall peak in shipping yet. >> really pretty staggering.l. we're just not seeing a fall peak in shipping yet. >> really pretty staggering.. we're just not seeing a fall peak in shipping yet. >> really pretty staggering. years ago they said everything is done over computers and we won't really -- but we did need to move things over space more than ever, i think. used to have an i-75 indicator. could you count the trucks on i-75 going through a bridge in

cincinnati. more relevant than ever. and all the digital stuff, now you need to ship components overnight somehow. >> absolutely. well, truck tonnage has gone from frgrowing at 6% to less th 2%. and we're not seeing the fall surge. >> this sounds like it could be predating a recession or just 1% growth? >> i'll use the r word. if the current trends continue, our projections right now are for u.s. gdp to grow at 0.9% in the third quarter, 0.#% in t4% fourth quarter. so our forecasts in the first half of 2013 will be negative. you're a handsome man, becky is a about him she will, but andrew and i can understand if you've gone to the college bar to meet a girl at 9:00 and at 9:30 she's

not there, well, maybe she's late. but at 11:00 she's still not there, it means you've been stood up. well, the bottom line is we're not seeing a false peak in shipping. the u.s. economy right now according to freight flows is the process of being stood up. >> wow. that's big news. >> becky just said book this guy again because you said bombshell. andrew is dreaming about in you a cowboy hat. >> it's just the pulse. it tells us exactly what's happening. >> thank you. that was great. >> brought the full anecdote back. >> and don, seriously, if you're in new york, we do want you in here. this is great information for us to follow. >> happy to join you. >> okay. we'll see you soon. coming up, could we be in the middle of the next industrial revolution? our next guest says yes. wired magazine's editor joins us to explain. ♪ [ male announcer ] introducing a reason to look twice. the entirely new lexus es and the first-ever es hybrid.

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we're back this morning on "squawk." there's a revolution going on as could the nation, call it the maker movement. the latest innovations in technology. but can it spark the country's next industrial revolution? the next guest covers the ever-changing world of technology, chris anderson editor in chief of "wired" magazine. he's the author of a new book "makers the new industrial revolution" and we welcome you

here to the table. thank you for coming. >> thank you. >> so, i want to talk about 3-d printing this is part of your sort of theory that we're in this new industrial revolution. it won't come from big factories. we're all going to become our own industrialists if you will. how does it work? >> a 3-d printer is something you can buy for $2,000 or less. what it allows you to do is the same way your regular printer allows you to print out on paper, it allows you to take an image or object or design and brings it up in layers. >> i could never get my head around it. >> your printer takes bits and turns them into little dots of ink but if you went layer after layer and layer and rather than print it were plastic and eventually you'd build up something out of plastic. my kids are brilliant at dollhouse furniture and they printed it out of plastic and it comes out green and absolutely perfect and then they paint it. >> which is really cool and i

think about how expensive the printer ink is instead of printing out the doll seat and buying it on amazon and shipped to me, how does the economics work? >> the doll seat would be maybe about 30 cents. more to the point you can't buy it on amazon. it's just what you wanted, exactly the right size and you can paint it and make it more unique. >> can i get real things, too, if i want? >> you can get jewelry, right? >> you can get jewelry. >> you can get metal. >> the new desktop printers, it used to be hard and then they got easy and this generation is coming out this season, easy and desktop size, that's the $1,000 and $2,000 price. you send it up to the service and you'd like a photo printing service and then five days later it shows up. >> design my own necklace or something and send it to the printer? >> very big for jewelry and

design things that are impossible to fabricate in traditional ways and they come back made out of the material you want. >> when you say the new industrial revolution is upon us, how far off is this and does it really make becky and joe and myself part of it or are there going to be companies that will spring up that will be completely different? >> i think the analogies are very close to the digital revolution. the first digital revolution with the first computer and it was amazing to have a computer on your desktop and print one of something. it was mind blowing but it didn't change the economy. the second wave was the web where we connected all the computers and now we can publish to the world and that became entrepreneurship and that moved the economy. and the third one is taking it to the real world, taking the web lessons and innovation and the web culture and applying it to physical stuff. it starts with prototyping one on your desktop with a 3-d printer and the same file because it starts digital you can upload it to the cloud manufacturing services and made

in any volume you want. >> if you're an investor and you want to make money and be part of this, what do you do now? >> auto desk. >> auto desk. >> they are leading the pivot. the technologies have been around in industry for decades and they are just now pivoting to the consumer space. the internet started as industrial labs and then became personal. now, digital manufacturing is going from industry to digital. >> who is the big loser in all of this? because i'm assuming that big manufacturers ultimately will get hurt. >> i think it's tempting to look at winners and losers. look what happened with the web, what you saw was that, you know, the mainstream medias or hollywood lock on consumer attention because they owned, you know, radio towers and sole distribution, they lost the lock and the monopoly and they end up with infinite competition from the grass roots, but here we are. we're still on television and it turns out there's a place for both. i think mass manufacturing will be good for mass, what we're missing is niche, what we're

missing is the markets of 10,000. right now if you have a market of 10,000 you can't reach it because mass manufacturing won't work at that scale and you can't build your own factory. that's what this is allowing you to do is pick off the long tail of stuff and find the niche markets of unique things that don't want to be mass manufactured and do want to exist. >> we'll leave it there. congratulations on the new book, it is out next tuesday, it is called again "makers, the new industrial revolution" and, chris, thank you for being here. long tail is one of my favorites as is free. this is three in five years? >> more like nine. >> it feels like a very short period, like the new james patterson, good luck with the book. >> thank you. when we come back we have more of the top stories and more from europe, spain is auditing its banks and france is talking about huge taxes on its wealthy.

we've got the inside scoop on the big bank market scandals and investor confidence. and avoiding the fiscal cliff. what washington budget battle and tax policy could be doing to the economy. national bureau of economic research president james peterma is here to explain. plus, it's a smartphone showdown. could the latest results have blackberry maker research in motion gaining ground on apple? get the information behind the numbers. the second hour of "squawk box" begins right now.

happy friday, everybody, i'm becky quick along with andrew ross sorkin and joe kernen and here's your line-up for the final day of the trading week. we'll kick things off with "vanity fair" contributing editor and cnbc contributing editor beththy mcclain. and we'll talk about the chances of the u.s. slipping back to recession with ceo and professor james poterba, we heard things from an analyst that gave us scary thoughts. at 8:00 eastern time the ceo of research in motion joins us in a first on cnbc interview. the company reporting results last night that were better than expected. we'll have more on those numbers in just a minute. and at 8:15 eastern time senator rand paul joins us to talk about fed policy, the national debt and more. right now, though, i'll send it over to han drew who has this morning's headlines. >> take a look at futures we've got red arrows across the board. the dow looks like it would open

up 48 points lower and the s&p off five points and the nasdaq at nine points. let's get you to the morning headlines. let's see how shares of research in motion is doing after results. rimm reporting smaller-than-expected loss and an upbeat in sales and an increase in cash on hand, good news. but they're still losing money and we're going to be talking to their ceo later today. british regulators have proposed a ten-point plan to fix libor, but they're rejecting calls to scrap the entire system. the financial services authority says it would be virtually impossible to replace libor because it's so deeply entrenched. we'll debate that issue in a moment. and a multimillion dollar art threat has been resolved, it's been recovered and is now returned. police have arrested two suspects in the case along with the art were wines, watches and a 2010 carrera work stolen from

his home. at 8:30 eastern personal income spending, and we'll get you chicago pmi, should be interesting to get that number given some of the others. i don't know about durable goods yesterday and consumer sentiment. are you coming back, andrew? >> i'm coming back. >> are you going for a walk? >> taking your own sweet time about it. >> figure to go to get a walk. >> why don't you go get -- >> you said it. that's still him you said it earlier. >> i was reading a quote from the newspaper. >> you were reading a -- >> you've done it now. >> we've got some very serious news to talk about this morning across the pond. >> why do you walk so slowly back here? >> i thought knowing you i thought there was going to be a lot of talking going on this morning. >> not bad. not bad. >> you might have vamped for a

while, who knew. >> let's talk about spain, announcing major budget reforms -- >> we all went into the gutters. >> there's no standards with you. >> let's get back to france. president francois hollande is revealing a 75% tax on the wealthy. the european markets have red arrows across the board. with more on what's going on, steve? >> reporter: yeah, very good to see you guys aguy. in five hours' time that's when we're told we'll get this announcement which is the second part of a two-act drama. yesterday we had the first act which was the budget which pretty much ticked all the boxes from a european commission point of view, ie, spain was playing ball with all of the desires to work toward a fiscal compact and to work towards better regulation and better deficit control of the region.

and today it's all about the banks, the big audit is expected to show a shortfall of bank funding of somewhere in the region of 62 billion euros. a lot of question marks about whether it's a 62 billion euros or actually under underestimates significantly how much money they need to raise, it's not about the big guys which are deemed to raise money whenever they want, it's about the second tier and third tier banks and we think the likes of bank inter will be at the crux of this. but questions remain whether they'll have to unload assets into a bad bank at a lower level than they've currently marked them down which means they need to raise even more money. whether the public or private sector had been buying into the bad bank as well and question marks about what this means about their interpretation of their assets on the book because the housing decline unlike in the u.s. hasn't stopped here yet. in fact, people believe that with 1 million unsold homes in the country we're two to three

years away from the bottom of the housing market and they only marked prices down between 20% and 30% and some people think it's way too low and don't forget when assets went into a bad bank into ireland into the national asset management agency, they were marked down by 58% and the spanish have only marked theirs down between 20% and 30% and so there's a real discrepancy about what the assets are valued at and what they might have to be valued at if they're going into the bad bank to attract private investors because that's the idea to get the private insecter involved and off the balance sheet of the bad banks and apparently in five hours' time we'll get some answers, that remains to be seen. >> thank you very much, steve sedgwick. the food and drug administration is warning consumer the vast internet pharmacies are frauds. amid evidence that more people are shopping for their medicines online. it includes tips on how to spot

illegal pharmacies. links to state databases of licensed operations and why it would be dangerous to shop for drugs online. medtronic is buying a chinese medical products maker. and it's going to pay approximately $816 million in cash. believe me you've never heard of this company. it's kangchui, and it trades in the united states. maybe you do own them. >> do you know who has heard of them? >> who? >> jim cramer. >> the deal is worth approximately $35.75 a share. i don't know what type of medical devices they make. you know, i like a lot of things. i don't mind seeing toys made in china, that's fine, that's good. my defibrillator, maybe not. >> there are problems with defibrillators made here. >> that's true. my 737, no. >> no? >> you fly around on chinese airplanes? >> the iphone.

the iphone doesn't crash. >> chinese car if you lock your keys in them, you get a can opener and you can easily break into your car like a lunar landing module, you put your elbow right through it if you -- >> what do you want me to say? >> that amazon is planning an online marketplace? >> amazon is planning an online market place for wine sales, the second attempt to sell wines to consumers after a partner problem forced them to end the first one three years ago. they held a workshop in napa this week with members of the napa valley vintners association. they are planning to charge wineries a 15% commission on sales as well as a monthly fee of $50. >> another chinese company makes orthopedic implant products. >> you don't want that. yeah. >> sure. up next, we're going to welcome cnbc contributor and contributing editor of "vanity fair," beththy mcclain.

she's on her way to the set right now. we'll talk about everything from the financials to the election right after this. and later it's an iphone versus blackberry showdown. after last night's quarterly results from rimm, which stocks should you be buying now? you'll have the answer after this. comments, questions? send them to squawk@cnbc on twitter. [ male announcer ] whether it's kevin's smartphone...

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welcome back to "squawk." what changes are needed to restore faith to the u.s. financial system? joining is bethany mcclain, she's a contributing editor at "vanity fair" and she's a contribute contributor and she's the author of "the smartest guys in the room" and a number of other great books. we should probably name all of them. >> it's a pretty short list. >> you saw this news this morning. tim geithner sort of going straight at the s.e.c. and trying to rewrite the rules on the money market business. you've written about this issue before. >> i think it's good news. so far in d.c. the financial stability oversight council has been viewed as nothing something of a nothing burger and yet it's this institution or organization that should have a fair amount of power and it's supposed to be

in charge of financial stability that's a big deal, so to see active stepping in and taking an active stance on money mark eet funds is good. >> what's wrong with money market funds, right now investors are covered by the fdic. >> there's a game going on that we all believe that the net asset can't go below a dollar. and it was in danger and the government had to guarantee money market funds in order to prevent a run on them and that's not a great -- i don't think under dodd/frank the government doesn't have power to do it anymore. >> the s.e.c. was going to regulate them. they tried. and they failed about a month ago. >> yep. >> what i'm trying to figure out is so many of the mutual companies have lobbied against any new rules to collateralize -- any form of collateral, anything, arguing that the whole business

basically would go out of business. there would be no money market if you had to actually regulate. should there be a money market about is? >> i think there should be a money market business. the question is how it's represented to investors and how stable it is if we hit the financial skids again like we did in the fall of 2008. so, i don't think there's any question when you look back to the fall of 2008 that something needs to change. and it's amazing, there's been the hue and cry on the part of the banks and the mutual fund companies if you do anything, this will put us out of business forever and it's the end and there's got to be a better answer than that. >> we were talking last hour, tim geithner including in sheila bair's new book, being in the pockets of the banks. is that a fair accusation, unfair? how do you think about that? >> i think it's a tricky accusation because it all comes down to as you well know what was done for the banks in the 2008 and 2009 was in the interests of all of us or not, but i don't think his stance on

the money market funds proves it one way or the other. the big mutual fund companies aren't really the banks. they're overissues but they're not the same. >> we've had a number of bank ceos come on recently including sandy wile and phil percell more recently to say break up the banks. you take the opposite side of that. >> i don't know that i take the opposite side of that, but what are we going to replace the big banks with? you can't have the attitude of let's smash it to pieces without here's where we're going and my complaint about our policy toward the big banks since the financial crisis, look, we saved them after the financial crisis and since then there's been a slew of new rules and regulations. i think jamie dimon complained that no one has measured the impact of all of these rules and regulations. i think he's right when he says that and i don't see that anybody has stepped back and said, okay, we need a functioning financial system to have a functioning economy, what

sort of financial system best fits a modern economy? what do we want? what works for us to make our economy as strong as possible? so, when i hear break up the banks without replacement them with what i'm a little skeptical. >> do you have answers to any of those questions? >> of course, i don't. i'm a journalist. >> you get to ask questions. you do spend a lot of time looking at scandals. libor is the latest. uk trying to reform libor. is there a way to do it? there's a column in today's "new york times" saying that the latest strategy whatever it's going to be can't really work that the whole thing has to ultimately be replaced with something totally different. >> and what are we going to replace it with? >> this is the ultimate question. >> you know, it is and any way you spin it, this is bad news for the banks because it's yet another scandal no matter how serious you think it is, it's yet another scandal, and you say at a certain point how much can we take. the interesting thing about libor is that people knew it was flawed for decades.

and no one did anything about it and nobody seemed to care until all of a sudden everybody cares at once. that's kind of the history of financial scandals. it's a practice that everybody knows is going on and all of a sudden somebody says, whoa, wait a minute! what are we doing here? >>s who fault is it? you spotted enron early. but whose fault? when you say libor is it the media complicit? is it the regulators? does it matter? >> i think it's a similar issue to the financial crisis that we all believed housing prices were going to go up forever or almost everybody does or the first tech boom where dot-com prices were going to go to the sky forever and we all believe the same thing until somebody pulls back the curtain and you say, whoa, wait a minute, and there are always a few lone voices outside the establishment saying, no, no, you're crazy, but everybody thinks they're voices in the wilderness and they're insane until all of a sudden they seem to be right. >> how often do you go on facebook? >> i don't.

i'm a luddite. >> i've never gone on either. i like the idea of social things that allow you to never leave your house and never meet somebody face to face and it's very social but you can stay home and be social. >> socializing for the anti-social? >> right. but how does it become our -- i don't know, $80 billion and now i look back on that and now i'm thinking all of it, all of it is crap. >> maybe i see it in simple terms but i think for a company like facebook the whole business model is built on monetizing people's personal information at the end of the day that's what it has to be and now that they're a publicly traded company there's going to be more and more pressure to find ways to monetize people's personal information. if we all like that, i guess that's good, but if we don't like that, is that a problem at some point? >> will we look back and say -- that's what made me think about that when you said that.

and like lemmings, we're all using facebook. >> let's make it a tease and make it a yes or no. do you think there's a scam inside the whole dot-com world? >> it's so hard for me to say because of my age and the fact that i'm not a twenty-something actually embracing all the new technologies. to me, yeah, because at least with some of the companies the concept is built around taking -- around pushing a boundary that's going to become increasingly difficult. >> what time do you go to the bar? >> going back to that one? >> do you show up, like, right at 1:30 a.m.? >> i'm usually in bed by 9:00, sorry. >> great. you fit in perfectly with us, then. >> we'll have much more from bethany throughout the program. she'll stick around. thank you for that and playing along with our zaniness. >> it's you. it's all you. >> i'm trying to bail you out by using the same bad words that you use so it becomes sort of -- >> communal. >> right.

>> exactly. >> we'll fill you in right after this. let's check in on the markets this morning, the futures on this last trading day of not only september but the third quarter look a little lower. at this point the dow futures down 42 points and the s&p futures down by about 4.5, oil prices have rebounded some but they are signature around $92, and the ten year is yielding 1.618% and the yield continues to fall. the dollar is down against the euro today. euro's back up at 1.2922 and gold prices have barely budged. and coming up the nfl refs go back to work after reaching a labor agreement. we'll tell you how their return went. and james poterba on taxes and the deficit and as we went from two to one seven to one three, people predicting below one maybe next quarter. what about the possibility of a

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kept them off the job for the first three weeks of the season. the refs got a standing ovation. tipped their hat to the crowd as they heard from them as they took the field for the browns/ravens game for thursday night football. nfl commissioner roger goodell said the botched call at the end of seahawks/packers game was only wup of many factors to get the two sides to end the dispute. and the ravens actually defeated the browns 23-16. joe flacco threw for 356 yards and a touchdown and he ran for another score. and here's a fun fact for you, the ravens are the second team in nfl history to win on thursday night after winning a previous sunday night game. the only other team to ever do this, the miami dolphins back in 2003. okay. still to come, blackberry maker research in motion posting a big loss, but it was smaller than expected and shares are surging in premarket trading. we'll tell you if you should be a buyer. and in the next hour the ceo

will join us first on cnbc. but up next taxation and its effect on economic decisions, james poterba of the nber will join us. here's your q-4 channel check from phil lebeau. "squawk box" back right after this. here's what to watch for in the fourth quarter in the airline industry. all eyes will be on american airlines and whether or not it moves closer to a merger with us airways. now, american has a number of hurdles it needs to clear in bankruptcy court if it's going to exit bankruptcy early in 2013. meanwhile, us airways would like the creditors committee to endorse a merger with us airways while american is in bankruptcy. while that drama plays out in the fourth quarter, the other issue to look for in the industry fourth quarter bookings, they're expected to be strong and if jet fuel prices stay in check, then we could see a very profitable end of the year for the airlines.

that's your channel check for the airline industry. i'm phil lebeau.

welcome back to "squawk box" on this friday morning. in the headlines we've got a busy morning for economic numbers. in an hour we'll get the data on personal income and spending. and later this morning the chicago managers purchasing indention and the latest consumer sentiment index from the university of michigan. and spain is about to reveal just how much money to shore up its banks and will be releasing the results later this morning on audits of 14 different lenders a day after spain moves to reduce its massive budget deficit and we'll bring you all the information when it comes to us. and the los angeles city council will be voting today on a deal that would build a new 72,000-seat sports stadium downtown, that's why you're hearing the music. supporters are hoping a new stadium would attract an nfl team. los angeles, of course, had two nfl teams until 1994 when the rams moved to st. louis and the raiders returned to their original home in oakland, joe? >> yes, yes, that's true. okay, let's get a read,

andrew, on america's economic situation and whether we could see on the horizon another recession. joining us is james poterba president of the national bureau of economic research as well as an economics professor of economics at m.i.t. where are you coming from today? are you near kendall square, jim, or somewhere else? >> i'm on the m.i.t. campus close to the entrepreneurial hot spot of kendall square. >> next to the s&p diner. i know all the hot spots up there. here's where i want to start, we went 13 was the number on gdp. we had a gentleman that follows the transportation average which has been weak and he gave us a lot of numbers that, you know, didn't coincide with this good housing stuff we've seen lately. it almost looked recessionary, some of the stuff that we've been talking about. we now know that the nber doesn't have to be two straight quarters of negative gdp.

it can be the overall tone. could it be that we look and we're already in recession or could we be entering one in the next six months in your view? >> well, the nber doesn't do predicting, so it's very hard for me to offer any guesses where we're heading. >> you need a year to go back to decide we had a recession, like, you're the ultimate lagging indicator. >> we do often wait, and, in fact, this week's data revisions will indicate to some degree why we often take a long time to make a determination of when the peak or the trough in economic activity was, because there are sometimes revisions that are quite substantial in gdp numbers and in employment numbers. and i think it's way premature to try to hazard a guess about what's happening at the moment. i do think, you know, that what we've been seeing for quite some time is gradual recovery. the economy is growing stronger most of the time with some hiccups along the way. but it's a slower growth than, of course, many of us would like to see at this stage.

>> we did just see a bar chart, we've been coming down to get to 1.3 or 1.25, we're rounding it up. to get to that we've been coming down for a couple of quarters with the fiscal cliff looming, you just wonder whether, you know -- whether we have something like an '80-'82 situation not only do we come out of the last one strongly but it's just a presage to another one. >> one of the hard challenges in asession the u.s. economy is deciding whether the prospect of the fiscal cliff is in some sense compressing economic activity and leading firms to postpone their investment decisions, leading consumers in some cases to postpone purchase decisions simply because they're not sure what we're facing in 2013. >> is that happening? >> i suspect there's surely some depressing effect there. some of the recent research done on trying to measure economic uncertainty looking at the level of policy discussion around various tax and regulatory

issues seems to suggest a pretty important link between times when there's the risk of major policy change and a lower level of economic activity coming primarily through the investment channels. >> so, you say basically we could reform social security pretty easily. that's the easiest to tackle. reforming the tax code, not as easy but not as hard as medicare and medicaid. >> well, let me back you up for a second, because what really we face as we look at the long-term fiscal outlook in the u.s. is a three-part challenge. we know that we have entitlement programs on their currently trajectories are not sustainable. we know that we have a tax code that can almost surely be improved with various reforms and we also know that we have a set of expiring provisions in both the tax code and the budget sequester which starts in january of 2013 if nothing changes which creates a lot of turbulence in fiscal policy unless we do something about that. the real challenge for u.s.

policymakers and it's going to be a big challenge after the election, i think, is to try to figure out a way to get through the near term without causing lots of disruption and that probably means trying to avoid going over the fiscal cliff, while at the same time beginning the challenge and process of long-term fiscal adjustments. when i suggest that social security's probably the easiest place to start, it's not something that i would start by making any dramatic changes for benefits or for people who are eligible for the program now. it's really something where one could start today or in 2013 to think about what we could do to change program rules, change both the taxing side and the benefits side in order to put the program on a different long-term trajectory which would mean we would not be shifting as much of the burden to future taxpayers. >> you know, james, you lay it out that way but yesterday we had former senator sam nun on the program and he said politically speaking you really need to wrap all these things together, the only way to get politicians all to come to the

table when they have such different ideas about what needs to be done to have some sort of a grand bargain. does that make sense? i know politics isn't your specialty, but if you can cram it all together? >> i would defer the politics to those who are in washington. i think it is possible that there are enough different elements that need to be addressed as part of a fiscal bargain that one could put all of them together. my experience in 2005 was when i was on a tax reform panel that was appointed by then president bush was that it was -- it was easier to try to get people to think about one holistic reform of the tax system which would, for example, bundle together changes in rates, changes in deductions and exemptions than to go in a rifle-shot way to say let's change this particular provision. if one extrapolates from that experience, it may well be that it is easier to get a grand budget bargain than to think about trying to tackle individual portions of the budget challenge independently. >> so, i guess a question is,

given that nothing happens until the election and then we've got -- after that we only have about six months, will there have to be some type of temporary kick the can down the road while we decide how to address these long-term issues? is that okay? >> the first issue i think is that addressing the long-term issues is a challenging problem, both politically and economically, so i think it's actually pretty important to try to do that in a deliberate way and not to try in a lame-duck session before the end of the year to make major changes to the entitlement programs in particular. that makes me think that there's likely to be some attempt to get a near-term fix on budget issues and then a longer-term solution which comes later. i do think the outcome of the election is going to be absolutely central for deciding how we proceed on these things and for determining what, if anything, happens in the lame duck session or whether it all waits until 2013 for some resolution. >> and you talk if it was

president obama gets re-elected, then at the high end you'll see the bush tax cuts not extended for the high end. and then -- but if romney wins it, you would see them all extended. is there one that would have a better outcome in your view? >> you know, i think there's a -- there's a tension between two different things here. on the one hand, there's a sense that in the very near term with a weak overall economic performance continuing that raising levels of taxes wherever in the distribution may have some negative effects on economic growth. and then there's a harder long-term question, frankly, which is how tax rates on capital gains, on dividends which feed through a somewhat complicated channel by encouraging various kinds of saving activity and ultimately lowering the cost of capital to businesses and encouraging investment, how that translates into long-term economic growth. that is frankly a difficult

chain to try to measure in any precise way, and consequently it's harder to be able to trace through the quantitative impacts on growth to follow through on channels for that. >> to follow-up on that, which plan, do you think it's problematic for the economy at this point to have taxes raised if it's only on the higher-level income? >> my best guess is that raising -- raising any taxes in the near term will have some adverse effect on economic activity. but i think that we really need to try to move beyond what i would call the near-term keynesian focus which is thinking about just the stabilization policy aspects or, you know, the impact on overall economic activity in the near term. tax reform is really something that needs to be thought about as a longer-term set of issues, we need to be focusing on what kind of a tax system do we want to have and that's a debate that i hope we will manage to begin sometime in early 2013. i don't think we've had it yet.

>> you are careful about politics. i know you -- do you sometime visit the harvard square area so you're very nervous about -- i mean, kendall safe you're safe with the private sector stuff, so you might be up there in a chinese restaurant or something, is that why you're so careful? >> you know, it's -- this is i think in my professional career, this is one of the hardest times to make forecasts about where we are heading. >> everybody's tainted with political -- you're right. okay. be careful. wear some dark glasses up there if you leave kendall square. >> we'll be careful. >> you be very, very careful, peoples republic -- anyway, that's neither here nor there. thank you for being here, because we need to know if we had a recession. we'll call you in 2015 to see if we had one this year. >> happy to be here. when we come back we'll ask if the blackberry has lost its swagger or not. what's up next for research in

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welcome back to "squawk" this morning. the iphone 5 is being rolled out worldwide today. as the one-year anniversary of steve jobs' death approaches, they've created an incredibly life like wax figure, with the trademark black turtle and open glasses and blue jeans. it debuts in the hong kong outpost of the madame tussauds wax attraction. rimm shares jumping after a smaller-than-expected loss. analysts point to the inside catin indications that they'll have enough money to roll it out.

mike, i have to say as a long-term blackberry holdout even i am considering jumping over to the iphone. how much time does blackberry -- how much time does rimm really have left? >> you're not alone. i think there are a lot of people who are considering moving from blackberry particularly to the iphone 5. you know, this has given them some breathing room that was unexpected to get to blackberry 10 and it was actually rather surprising that they were able to load up on more cash and more subscribers. but at the same time it doesn't diminish the huge uphill battle that they still have to fight. >> what do they have to do and how soon is the blackberry 10 coming? >> well, they haven't been specific. they've always said sort of around q-1 next year and they aren't going to show us any new phones this year either, as well some of the demo units present at the recent developers conference i would say were not fully stable. so, things are still in the

works but it still appears like it's coming q-1 but they haven't been that specific. >> when was it? we were just trying to remember. i know you were a longtime rimm supporter, when did you say forget it, not doing it anymore? >> when we said we were wrong was when the playbook came to market and the stock was at about $60, $65 at that point, because what happened rimm produced a software and a product that was totally uncompetitive but it was the delusional aspect in some cases is in place today at the way they are trying to throw themselves against apple and android in my opinion that really caused this to kind of reverse and say these guys i think are really not positioning themselves i think for future success. >> what did you rate them? >> there's seven states of coming to grips with something. that must have been your very first one, because you were in average states of denial. you didn't get out of this thing. when we were interviewing, you weren't telling us to sell it at

$60. it was canada's biggest company, or canadian. you held out against all hope and all odds on this, didn't you? >> 60 bucks, joe, just to go back and take a look. but, you know, i mean, and there are still analysts that held on a lot longer than i did. but i was well recognized with that name. but i think this is the same dilemma that apple analysts face right now with regard to apple. apple is not run by any stake in the imagination. but at the time you had a company whose earnings were growing and the revenues and stock and p/e were going in an opposite direction but it really took i think a look at the way they were moving forward and trying to compete now with the shifts happening in the market really i think in a wrong way that -- and i think that that is still the error to some extent that they're making today. >> you know, i'm just looking at the analysts recommendations and in the current month there are only two analysts who have a buy. nobody's got a strong buy on it. only two analysts have a buy.

28 have a hold. 11 have an underperform, six have a sell. what do you do with this stock at this point, mike? >> you know, it's really hard to say right now because the stock could go to, you know, certainly probably to cash. and even that will probably discount it. or it could go i think in the near term higher as more pieces of their blackberry 10 strategy start to get unveiled and hope, say, comes into the stock. but in the long term i don't think that, you know, you consider this a turnaround play yet from a stock point of view or even a value play. >> you mentioned hope coming into the stock. what are the reasons to hope? what are the reasons that are left to believe in this company? >> well, 80 million subscribers is nothing to shake a stick at, and although people like becky are switching over -- >> i haven't switched over yet. i'm considering it. >> all right. all right. >> i'm considering. >> sorry, becky. >> yes. >> i think the fact that they were able to add subs, add cash in a quarter where it's very

clear to everybody that they're moving on to a new os, they still have dominance in emerging markets. there's been reports in some markets like south africa they have more than 25% share, for example, of the low-end messaging market and those markets are very valuable if they can make money at those markets, which, you know, for some extent they still may be able to do. and so from that perspective that gives them an opportunity. plus, they still are the most secure solution on the marketplace. and to some extent there will be enterprises that will have concerns about the security vulnerabilities of android and apple. and then finally the keyboard. people still like physical keyboards. one of the new blackberry 10 products will be a physical keyboard device. i don't know why rimm isn't pushing that hard on it but i do happen to think that is still one of the areas they have a very unique cachet. >> you would think they would have a passive portfolio. is it worth more than $8? >> well, yes, and you could do

some of the parts and say in an acquisition or break-up scenario that's the case. but we're talking about whether or not they're going to be able to turn around. patents didn't help kodak very much, for example, as you saw, so, you know, to some extent it's uncertain how they can monetize what is still strong patents. so, you know, i think this is still really about whether they can turn the business around relative to blackberry 10. and i'm doubtful. >> will warn you, becky, i still can't type on my iphone, and that may say more about me. >> that's why i haven't gone over yet. i love the keyboard. i love the actual keyboard. >> all right, mike, thank you very much, we appreciate it. >> thank you. at the top of the next hour research in motion ceo thorsten heins will be talking about rimm and its future. and senator rand paul will be talking fed taxes and policies and much more.

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they listen to "cold play." meanwhile we're going to take a look at stocks to watch. i'm looking at some other news. >> what? >> they are digging up a driveway in michigan because they think jimmy hoffa -- >> what? >> yes. collecting soil samples under the driveway of a house, they started in roseville, michigan, and an informant claims he saw a body buried there around the time jimmy hoffa disappeared july 30th, 1975. i always look when i go to a giants game or a jets game i think he's somewhere -- >> on one of the end zones. >> on one of the end zones or in a parking lot. >> wow. >> bringing us the real news. >> ground penetrating radar indicates something about two feet below the driveway. the soil samples will be sent to michigan state university to see if human remains are found. >> where did they get the tip, though? >> they did get a tip from someone that a body had been

buried. but this guy has been missing for -- were you even born in 1975? >> i was not. >> not even born. >> not even born. >> not on the planet. >> i've heard the stories, i've seen lots of things but i was not around. >> all right. well, you want to see some other news? you want to see the wall green news is what you're interested in? >> tell me about it. >> quarter 30 profits 63 cents a share seven cents ahead of expectations although there was a 1.3% drop in same storefront end, that's where the hemorrhoid stuff is, you know, all the stuff not the stuff you need a prescription for. i don't know why that came -- >> why did you go with that first? >> i'm not really sure. same-store prescription sales fell 12.8%. united technologies has been downgraded to perform at oppenheimer. i guess that's probably a market perform. the firm says it's no longer as enthusiastic as it was about the

faster growth that had been fueled about recent acquisitions. we mentioned nike earlier first quarter, $1.23, 11 cents ahead of expectations, revenue was above but gross margin could decline by 80 basis points over the quarter. and finally finish line, that's not where they got the refs, right? do they wear ref outfits, too, or is it foot locker? >> foot locker. >> that's where they got the temporary refs. they reported a 49 cents share profit. they recently struck a deal with macy's to become that retailer's exclusive provider of athletic shoes. do we know anything for sure about rimm, about -- we don't know anything for sure. >> what do you mean? >> i don't know. >> i still have my blackberry and i love my -- >> no, about when certain analysts did go negative and when they didn't. we don't know for sure. >> we don't know for sure. but looking back it was -- it

was yahoo! finance that wrote the story. but i'd like to clarify. >> we don't want to shoot first and ask questions later. >> we'll ask questions in just a little bit. >> all right. we do have the rimm guy? >> the ceo. >> for the interview. >> listening to us perhaps even right now. >> he stuck around. is this your interview? >> no, i think becky's leading it. >> there he is. >> thorsten heins. >> got a lot of things to explain. >> and to talk about. >> yeah. >> and i'd like to hear a lot about the blackberry 10, when it's coming out and what it looks like. when we come back we'll be talking to thorsten heins as we just mentioned. the message after the bell was a good one, you saw the stock up 20% but there are critics out there who still have a lot of questions about what's to come next. at this point the company is committed to a major transition. we'll hear more about that in just a moment. and tea party member senator rand paul will join us to talk about the elections, the deficit, the federal reserve, one of his favorite topics, much

more.

research in motion's quarterly reports shocking the markets sending the stock up 20%. but will next year's blackberry 10 help stop the loss of market

share to companies like apple and samsung, thorsten heins will join us first on cnbc. the fight for the swing states. senator rand paul hoping to bring libertarian and tea party voters into the romney camp. we'll ask him about his message to voters in battleground states just north of his like ohio. and it's the final trading day of the third quarter. find out what's making you money and what's dragging your portfolio down in our sector spotlight. the third hour of "squawk box" starts right now. ♪ what does that mean nothing going to break my stride nobody going to slow me down ♪ ♪ oh no i got to keep on moving ♪ >> welcome back. i don't know. welcome back to "squawk box" here on cnbc first in business worldwide, i'm joe kernen along with becky quick and andrew ross sorkin, and our guest host is bethany mclean, author "the

smartest guy in the room" the account of record on the fall of enron and she's a cnbc contributor and -- >> and also her doubles are here, her most recent book. >> we had seamus on last week. >> did you? >> yes, he was here for a few hours. >> did he talk about china? >> he talked about china. >> you were a reporter and you said, you know, this enron is a mess, right? that was kind of the initial tip-off, wasn't it? >> it was more he said you tell me how enron makes its money, and i had worked in banking for a couple years other than i did know how to read a financial statement. >> and you knew who he was. you're not old enough to remember baldwin united, really? >> i was not. but, you know, i'd worked on this column for "fortune" called companies to watch for a number of years where i was supposed to pick a bunch of stocks that would double and triple and quadruple in value in the next six months that i had burned for

so many times to look for people who are skeptical to kind of search out the other side of the story and all the people that would sell the stories, every single time i printed them i would watch as the stock went into the opposite direction. >> i've been here so long, we used to go to the business council meetings all the time down there, there was always one guy we knew we could always get because the company would always offer him up, no, we talked to ken lay so many times. we always were offered ken lay to do when we went to the business meetings and the next thing you know if we could have gotten him, we would have given anything to talk to him. we didn't appreciate when we had him all those times. >> you put jon corzine in that camp? >> he was a -- i think he may have -- never mind. let's get a check on the markets this morning. u.s. futures at this hour, take a look at what's going on if we could flip that screen around. it looks like the implied open

47 points off the dow would open. nasdaq would be off about eight points. s&p 500 would also be off. taking a look overseas in asia, as we flip some of those screens around even further, we've got marginally higher. shanghai composite, hang seng as well and european equities going to be closing up quite soon. ftse is up marginally and the cac is off. france's new budget imposed about 20 billion euros in new taxes mainly on wealthy households. president hole land salande sai budget is the tough nest 30 years, it needs to have additional spending cuts or additional taxes. it includes a 75% tax for higher earners. and the results of an audit of spanish banks released later today reveals the amount needed to recapitalize the beleaguered banks. the audit results come one day after spain announced its 2013

budget. research in motion reporting a smaller-than-expected loss and revenue is higher than expectations and it's better news than the market was anticipating and the stock was up 20% on the news. but rimm has a long way to go back after losing half its value this year. the company is betting the new blackberry 10 will be a game changer when released in 2013. joining us first on cnbc is thorsten heins, he's president and ceo of research in motion, and thank you for joining us this morning. congratulations on the results last night. but what now for rimm? >> thank you, and good morning, first. what now is it was an important first step to really execute -- the challenges we face. and there's many challenges before we launch blackberry 10 and i think the market will be excited about what blackberry 10 has to show. >> what is it going to look like? what is it going to deliver? there are a lot of questions and

as someone myself who is a long-term blackberry user, i'm really considering right now looking at the iphone and looking at blackberry, you always had me with blackberry because of the keyboard but i am looking for a phone that offers more things. what is the blackberry 10 going to offer? >> so, first, to you becky, there will be a blackberry 10 device with a fantastic keyboard experience. >> that's a big sell. >> yes. and, you know, hold on to it and we have a great new device coming to you. but there's also a full touch version as we know that the market is zs into touch and qwerty keyboards, we need and want to gain market share in the full touch segment, what blackberry 10 delivers is a whole unique user experience. it is not the and out paradigm of any application grid as you know it on today's devices. it is the blackberry hub that really connects all of your conversations, action items, touch, much more than just a social networking aggregator.

and the user interface that we call the blackberry flow that akro allows you to take action across all the applications with the slide of a thumb, so we're very excited about it and we are truly convinced that this is going to be a mind-changing experience. >> thorsten i played with the blackberry 10 and i will admit it's pretty awesome. but i played -- i got to see one, they had developer versions around. i also have played with the microsoft new windows phone on nokia which is also pretty awesome but it hasn't really penetrated the market in part because it hasn't had the apps and because frankly android and apple are so far ahead. what do you do about that issue? >> so, we have just concluded blackberry gem conferences in about 30 cities worldwide. you heard about the blackberry gem in america where it culminated in a great session where we revealed a few more

features of blackberry 10. we have and are working on an application we get raving feedback for the application developer tools that we're providing. where this time we listen actually to the application developers and ask them what do you need from us in order to develop against blackberry 10 because frankly developing against the former blackberry os wasn't always quite as easy and they're subscribing big time to blackberry 10 and i am extremely confident and i see the apps coming in, every day people pose apps to me and show them to me and i'm very, very confident that we will be launching not only with a great device, i think we will have sufficient and also meaningful applications on blackberry 10. >> what do you say to your company's many skeptics who say there's no way rimm can make its way back from this? >> i think it's important to understand that rimm has clearly identified its position in the market. we call them the blackberry people. we want to be the best tool.

we want to be the best friend of those people that want to achieve their own personal success. that can be a business executive, but it can be a sports guy. it can be an artist. it can be actually a student in university, right? we want to help them to achieve success. this is what all of blackberry 10 centers around. and needless to say that browsing and multimedia it's going to be there. it's going to be there at a very high performance level. >> i think the market was surprised that you were able to add to your user base over this past quarter, but when they looked at who those users were, a lot of them were coming in developing nations. where do you see the core blackberry user and where are you going to make gains down the road? >> blackberry today sees a very different situation in various regions, becky. we certainly had market share losses in the u.s. no doubt about this. but we are still gaining gainins

in south africa and middle east and it is because of the combination of a great device with a good user interface, but mostly also because of bbms. blackberry messenger just kicks it in those markets and the combination of these elements just makes us so successful. so, the way i look at this is, i want to continue to grow my subscriber base in asia, middle east, south africa, very exciting to be there. i just came back from there. i want to regain market share in the u.s. i want to win not you back but i want to keep you using your blackberry, becky, with a great qwerty device and i want to gain market share in the full tech segment and that's what the company is geared up to. that's what we're working towards, and this quarter was a one step, you know, in a longer ju n journey that the company has to go through. >> in the markets that you just mentioned that you are

succeeding, part of the offering and the reason for that is price. once you factor in blackberry 10, are you offering the same phone that you are offering in the u.s. there? is there a cheaper phone? how does that work? >> it's not just price actually. what it is, it's the combination of blackberry messenger on a device that sits at the right price point, and then what also helps those customers tremendously actually is the network compression in those networks. because remember they are on 2g or 3 g, it combines with a grea package and it attracts customers in those regions and that's the strength that only blackberry has. >> i think of blackberry and the smartphones when you first started seeing iphones, that's for consumers but businesses continue to use the blackberry because they trust the security more than they trust the iphone and that seems to have shifted over the last couple years. you hear about more and more businesses that are allowing their workers to choose iphones

over blackberry. can you win back the key corporate customers and can you stop losing many of those people to the iphones? >> bring your own device to work is a trend that is reality. you're absolutely right. however, in the really mostly secure companies, blackberry still is the one. but we have to address the byod segment and trend, you're absolutely right. the way we do this is the new devices on blackberry 10. we have a feature called blackberry balance that allows you based on the technology that sits under the hood of that to run really two very separate parameters on the device, a corporate one and a personal one. and because we have this fantastic os underneath, you can run them on really two separate programmers. ceos love it and consumers love it. because the one protects the privacy and the other protects the security of the corporation information. >> when is the blackberry 10 coming? >> first quarter 2013. >> january or march?

>> first quarter 2013. >> you're not going to give us any more on this? >> not today. >> okay. real quick, i have one last question. we had an analyst on earlier who said he was surprised you haven't pushed more on the keyboard in terms of promoting this, and i understand that there's this touch market that you want to get into a bigger way, but why not focus more on the keyboard given that that seems to be a real strength? >> we have a full focus on the full qwerty keypad because we know the blackberry lovers, the heart of the blackberry lovers, they love the physical keyboard. the more complex software architecture was around before touch device, so we needed to get this into the labs with our partners first to basically clear it and then get the qwerty device as the next one, and then it's followed on a 30- or 60-day lag time. it depends on the launch of the

carriers. we're fully committed to qwerty. >> just to clarify, likely the touch version will come out before the new 10 keyboard version, is that what you're saying? >> i think that's a good bet, yep. and the reasonable is what we just discussed before, because we need to discuss the byod trend, the way you look at that industry and that segment is, it is touch. people, consumer oriented and enterprises love a full-touch device. and, you know, we had to make a choice and finally we decided really to bring both versions to market very, very close together. >> thorsten heins, thank you very much for your time today. >> you're very welcome. >> thorsten heins of research in motion. >> thank you. >> i don't know. joe's making the same decision. >> i was. >> but it takes me so long to do anything, i can probably wait for this. that's why the january/march question was -- >> yeah, and i liked it. >> you don't use your thumbs on the touch things, right? >> i had an iphone for two weeks and i had to give it back

because i couldn't -- >> i do thumbs. >> you do thumbs on -- you turn it sideways. >> i like the byod thing. >> i did, too. coming up -- are you buyg >> i might. >> we're 39 days -- 39 days -- now from the presidential election. and unless you live in a state with early voting and i think it started in iowa, up next we want to talk to kentucky senator rand paul, he's helping the romney campaign court libertarian and tea party voters in a state next to his, ohio. and the dow's up 4.7% as we head to the -- head to the closer to the opening bell, we'll listen to -- do you know what this is? "imagine dragon." >> not as cool as you. >> you like cold play you requested that earlier and spinach dip, right?

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just 39 days now until the election. but with early voting in iowa and ohio, election day is coming a month early. here now to talk about what's being called election month, kentucky senator and romney campaign circuit rand paul. senator paul spent time with governor romney campaigning in ohio this week. senator, it's great to see you. >> good morning, glad to be with you. >> kentucky is i think safe, and i'm from cincinnati and i would imagine that southern ohio is safe and that the work that romney has to do is probably as you go north, it gets harder and harder. is that the case in ohio? >> well, you know, i think in kentucky we've got it pretty well sewn up. ohio is more difficult. but, you know, in 2010, rob portman wins by 18 points, kasich wins for governor, they win the statehouse and the state senate and 10 out of 18 congressional seats and i'm hard-pressed to know how it's different in 2012 than it was in 2010. i think most of the polling is

modeling, you know, 2008, and i think it's going to be closer to 2010 than it's going to be to 2008. >> senator, do you think for the votes that romney needs to get in ohio, is it -- does it help him to seem more conservative and get your support and it's, like, some of the conservatives say, wow, i like romney now because rand paul is associating himself with him, or does it hurt people that might be in cleveland or, you know, somewhere in the more, i don't know, urban centers of ohio? i don't know what the difference? i grew up there, as i said, and there's major differences we thought between cincinnati and cleveland and just how we viewed a lot of things. does it help or hurt to have tea party support in ohio? >> well, i personally think sort of libertarian republicans attract people from the left, the right, and the center. those of us who are ready to come home from afghanistan, for

example, i think attract some democrats and moderates. but as far as what governor romney needs to be, needs to be who he is, not who i am. but i'm happy to campaign for him there and hopefully that some people who do like a little less aggressive foreign policy, who are fiscally conservative but want the government to be limited and really think that the debt's a problem, those have been the things that i have talked about. and i think that will attract some moderates and independents also to the ticket. >> when -- and i see it where what you just said, people are -- romney was interviewed by cnn, said about ohio, polls go up and polls go down, but when november 6th comes people are going to recognize we don't want a government that just keeps getting larger and larger and we want more, you know, business and the private sector to do better. and when he picked ryan, i thought, all right, it's a clear choice now, the country has a clear choice which way they want to go. but something got lost in the last -- you can just look at the polls where that didn't --

people are not looking at that at this point. they must be looking at something else because we do see president obama leading in most polls. what changed? what's different? >> well, it doesn't help when all the networks run a secret tape about 10,000 times in one week, and i think that really slanted and skewed the news. but i also think that the polling onslaught that comes out that shows him behind, i don't think it's accurate. because i think the filters are closer to a 2008 model. and a 2010 model was dramatically different. the tea party energized in 2009 and came out in 2010, i still think they're energized, and i think the silver lining of the supreme court upholding obama care is, is that those of us in the tea party who think obama care's a disaster for the country, we're all going to turn out because we know the only way we can stop it now is by electing governor romney. >> that's 53-43 or something.

that's what i don't understand, there seems to be a disconnect. it seems to be 53-43 against, i don't know why the election -- it's not a single-issue vote obviously. >> i still think the election goes our way. i've been predicting all along that really i think the election's over and romney's won, because the mood of the country still is very concerned about the debt but also very concerned about not having jobs, having 20 million people out of work and so i think all of that goes in our favor still. >> senator, very quickly, and joe alluded to this earlier, this idea of the divide what paul ryan in some respects was supposed to represent. do you think that romney has tacked too far to the middle? in the past week or two he's talked about taxes and suggested that actually on upper and middle-class earners that their taxes aren't going to go down, for example? >> well, i think it needs to be even simpler than that as far as the message, and i don't know about tacking this way or that

way. i think genuineness helps you in elections. but what i would say is the main difference between the candidates from my perspective is that president obama thinks that you can hire more government workers and that will stimulate the economy. i see government workers not as bad people, but they're in the wagon. you got to have more people pulling the wagon. i think governor romney understands that. you got to grow the private sector. >> senator paul, thank you for being on today. appreciate it a lot. okay. we got a lot more coming up. at 8:30 eastern we'll get personal spending data for august and talking about the effect of this summer's drought. [ male announcer ] eligible for medicare?

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welcome back to "squawk box," everyone. in our headlines, amazon is said to be planning an online marketplace for wine sales made directly to consumers. "the wall street journal" reports the company hosted a workshop this week in napa and it invited california wineries to attend. this would actually be amazon's second foray into the business in three years. back in 2009 they pulled back for an effort to ship wine after the partners suspended operations amid financial troubles. this latest effort would put the shipping responsibility on to the vineyards themselves. it sounds like an interesting proposal. when we come back, breaking numbers on the consumer. we're a few minutes away from personal income and spending numbers. "squawk" will be right back.

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the numbers. we've got red arrows, the dow looks like it's off about 73 points and nasdaq off about 13 points and the s&p 500 would be off close to nine points. rick santelli is standing by at the cme and steve liesman in the studio and rick's got the numbers in just, oh, about three seconds there. >> yeah. no, it's like watching a rocket blast off, three, two, one, and, boom, the buzzer will go off and august personal income up 0.10, spending up 0.10, and spot on with expectations and there was subtle revisions. the income number actually a big revision. the income number originally released up 0.3 of 1% and now only up 0.10%. as i look at spending outpacing income i always get a little bit nervous but i'm sure that the likes of the federal open market committee gets a little bit happy. different directions i guess on philosophy of the medicine we're applying. if we look at some broader

metrics embedded in this series of data, we look at the personal consumption expenditure, the deflator, we look at it month over month, up 0.4%, about right, if we look at it year over year, up 0.5%, no surprise. if you look at core, up 0.10%, and i don't get any insight to those numbers. now, we may have more insight as the day wears on. chicago purchasing managers survey should be important especially after we see what was going with aircraft orders, some of the issues regarding the european side of the auto and manufacturing industries slowing down, what effects that will have ultimately, and being a friday after yesterday's budget from spain and, of course, their stress tests on the banks due out today, and then looking at the european equities and how they're trading, i guess disappointment, uncertainty continue to creep in. and in front of the weekend, we know what that possibly could

mean. back to you. >> okay, thanks rick. for more on the data we'll get to steve liesman who will break it down for us, sir. >> well, my computer crashed a second time. but i think i remember the number. guys, it's all about the inflation, even though there's a little bit of it, the 0.04% was light to what economists were expecting. what's happened is the -- you take the -- whatever inflation is out there and you subtract it from the income numbers that are there and you get minus 0.3 on income, we've done 0.1 and 0.1 if you want to know why the poll numbers earlier this week are so downbeat are so pessimistic it's because incomes aren't rising and what little inflation there is erodes the buying. >> higher and higher prices at the grocery store and gas prices and anything else are cutting into what you're saving. >> or spending. you could have been doing all kinds of things with that money but basically it's right in line with the lackluster recovery we have. i brought along some charts, i'm

assuming they're ready, to look another piece of data out there. let's do the first one. there's another piece of income which is out there, 17%, that's the total right there. what will happen here and what you'll see is you have government transfers, the total personal income right about 17% right now. why the bump up? well, you had a bump up in unemployment insurance, that's a big chunk of it, and you also half, you know, social security is rising and other veterans benefits rising. the next chart you can see the growth rate. this is sort of not by the size of the program but by the growth rate, veterans benefits growing at 15%. this is from the prior month's numbers here and those are the big chunks if you want to fix the problem, guys, right there, social security, 760, and medicaid 414, and medicare, i can't even read that anymore -- >> 3.05. >> in your book, bankamerica

bought merrill, and it's a $1.9 billion pretax negative ffo, they settled it for $2.3 billion, didn't they? >> $2.43 billion they settled it for and it's a class action lawsuit brought in 2009. >> right. >> and you remember -- >> this was all about whether -- >> they found out it would be much more. much bigger. >> right before they closed the deal whether they were supposed to disclose that to shareholders or not. brian moynihan in this statement saying that resolving this litigation removes uncertainty and risks and in the best interests of our shareholders as we put to put the long-standing issues behind us, the focus is to serve the customers and clients. one quick note who is paying the shareholders? well, the shareholders, that's how these things typically work. >> yeah, right. >> steve, did you have another chart? >> no, i'm good, thanks. >> hey, rick -- >> i wanted to point out that the unemployment insurance is going down while the other things are going up right now.

coming off of the rolls for at least a moment here. >> we had the nber guy on. >> steve poterba. >> and the guys that decide whether we have a recession or not, rick, usually it's like a year after the recession started you find out you're in one. and a year after it's ended you find out you're out of one. so, it didn't really help to ask him. but given that number we saw yesterday with gdp and you look at the way the bar charts looked and then the durable goods for whatever reason, i guess it's the drought, but you got that on one hand and then you got housing prices seem to be stabilizing and you got consumer confidence seems to be a little better. are we seeing the results of the spring slowdown in the gdp when we've already turned and started improving a little bit or are we still sort of on a downward or are we just bouncing along on the bottom? >> i don't know. my read would be that the housing issues move that off to the side. i think the gdp and durables number tell us that our glide path is pretty close to the

ground although we're not touching. and with respect to housing, there definitely has been improvement. but once again, every metric, new home sales, 373,000. it isn't bad. and it's an improvement. i think it's actually close to the best pace since 2010. but when you realize that the entire '04 and '05 were above 1 million units, it gives you some perspective. i don't think we can ever get back there. because that was the bubblicious years, the thing the fed is sowing seeds for now, they are sowing bubblicious seeds all over the place. but my point is i think housing is getting to its new normal. i think the rates we're seeing are going to be the rates for a while in terms of existing homes and even new homes being 10% of the market it's a bit disorted. talk to people. i have friends that they can't buy the house they like for a good deal that's already built because the systems and the appraisals and the banks don't go along with them, when you buy a new house it's not a good deal

but it seems to pass the litmus test. >> i don't agree with you. >> i don't care what you think, actually. >> rick, how old are your daughters? >> low 20s to upper teens. >> okay, so this is my theory as to why you're wrong. is that there is only -- >> i'm not wrong. it's your opinion. >> my opinion. >> it's an alternate universe. >> there's only so long that people will tolerate their daughters and their sons living on their couches in their spare bedroom in the house. the demographics of the country are such that they're growing and the housing creep -- the household creation numbers are so at odds right now with what the -- >> you have different parents than i do. my parents would love it if we never moved out of the house. >> if you never moved out. >> they want us all back home. >> me, too. >> i think it's anecdotal at best and that's because i'm in a good mood. >> that's okay. we're at a permanent 750,000, what is that housing starts and household -- >> i will hold my son back so he can't go to school so i'll have an extra year.

>> home school. >> the best buy in all is futons, the public company. >> do you know what, steve, i think the country better get used to it -- >> you're right. that's what's going to happen, rick, if you're right, people are going to be husband and wife with baby on the floor are going to be living in the living room on the futon. >> that's all ridiculous. do you know what americans -- americans need to do to get by and that's who we're forgetting. we're changing the culture of many things including housing. >> all i'm saying if you are correct these are the new normal numbers, that i am correct, parents are going to be living differently than -- >> and exactly what they do, and if we're the new japan, that's exactly where we're headed. >> all that room in nebraska, why would you do that? okay. we are turning japanese.

i missed the whole thing, the entire point of that song. but that's besides me. anyways, coming up, it's the final trading day in the third quarter. brought to you by --? yeah, andrew. >> we'll take a look at the best and worst-performing sectors. and you can pick from alec young. here's what to look for in the quarter ahead. we'll be experiencing ongoing soft data that could definitely keep interest rates on the soft side. switch gears, let's look at the mortgage backed security market, with the fed buying nearly $2 billion a day of mortgage backed securities to drive yield and the question is how much impact will it have on the actual mortgage market and the housing market?

many traders say little. but that's what to watch for. and last but not least, foreign exchange, look for better thy neighbor meaning big export economies like japan and germany to try to keep their currency a little bit weaker because as the pie shrinks, exports need to grow somehow. those are your fourth quarter channel tracks for treasuries. hey baby goat... no that's not yours... [ hikers whispering ] ...that's not yours. [ goat bleats ] na, na, na -- no! [ male announcer ] now you can take a photo right from video, so you'll never miss the perfect shot. [ hikers laughing, commenting ] at&t introduces the htc one x. now $99.99. rethink possible.

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sectors should you be investing in? let's find out from alex young. and alec, we are looking at the end of the quarter, the last trading day of the quarter, the worst performing sectors vj utilities, industrials, and consumer staples. what are you telling people you think is going to work for the fourth quarter? >> well, i think right now we're overweighting tech and discretionary and we're underweighting utilities and materials. and i think the overriding theme we want to be more domestic. we think most of the risks out there are global so we want to say u.s. focused. and we also want to hedge more bad news from overseas. so, we want to be long things like consumer discretionary and short things like materials. nothing is more vulnerable to bad news out of especially china which seems to be coming on a pretty regular basis than the entire commodity complex, so while energy has done very well for the quarter, if you were to look at it more recently, it

started to roll over with crude prices. so, we want to be long the u.s. best house, bad block, you know, discretionary theme and underweight the commodity complex, the global plays. >> you want to be long technology, but specifically within technology are you looking at different arenas? i mean, is this the pc play? is this a smartphone play or is this just across the board? >> well, it's definitely not a pc play. you know, apple's pretty hard to ignore. it's about a quarter of the s&p 500 sector, 5% of the s&p and our analyst has a buy on that stock with an $800 price target. we don't normally get into stock specifics with sector calls, but with apple it's part of the tech play. i think it's pretty much, you know, bottom-up stock-picking story for the analysts, it's probably best left to them, it is a global area but we feel topdownwise there's a lot of pent-up demand there, there's a lot of productivity enhancements that come with that spending so companies, people feel like, you know, they have to spend the money, so we're less worried about a negative surprises with

tech. but i would say our favorite play right now is discretionary. >> okay. you also say as we head into this election that this is a time to be buying. you're not worried about the fiscal cliff. >> not now anyway. i think the thinking there is we know one thing for sure, we don't know who will win the election but we know on november 2nd we'll have a new president, and the uncertainty will lead people to buy into the election event and if you look back at election years since 1900 roughly two-thirds of the time the annual high comes after the election in november and december, there's a very strong track record that removing the uncertainty of who wins the presidential election and the congress helps stocks, so we want clients to position ahead of that. we wouldn't let fiscal cliff worries keep you out of that trade because there will be plenty of time to trade the cliff later in the year, if you're worried about it, you can hedge it from what we think will probably be higher levels. >> ige wages are at a 50-year low relative to gdp, wage growth is really, really slow in the

united states. how do you get optimistic on the u.s. consumer which i think you need to in order to believe in this discretionary story. >> sure. >> because you have profit margins at an all-time high and revenue growth growing unless the consumer starts spending. >> the psychology is so negative on the economy and the consumer that's what happening is the sector is reacting better to good news than it's reacting negatively to bad news and you're seeing a very positive contrarian dynamic going on because everyone kind of knows what you just said. so, we're looking to fade what we think is a crowded theme. >> okay. alec, thank you very much. >> sure. >> we appreciate all the picks and we'll talk to you again soon. >> okay. coming up we'll take a trip to the new york stock exchange and get jim cramer's take on research in motion's surprising quarter and we'll find out what he thought about the interview with thorsten heins. and charlie evans will be our special guest on monday at 8:30 a.m. eastern, he was a stronged a quo cat for qe

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welcome back. >> welcome back to "squawk box." >> yep. >> i'm with you to the song. the you're welcome back to "squawk box." futures have been lower all session. didn't change much after the numbers. pmi could do something. we'll see. with the midwest hit hard by the summer drought we are keeping a close watch on crop prices. cnbc's jane wells joins us with details from the department of agriculture's crop report. you have been to fly over states. you were in california. >> i have spent more time in iowa than a person should. i'm kidding. it's a beautiful place. great people. fantastic state. >> an eye for the corn field. >> it's beautiful. no traffic. >> no, no traffic.

they're voting there today. did you know that? >> no. >> early voting starts in iowa today. >> i'm in california and 38 million people, all this money. nobody ever comes there. every time i was in iowa the president is there. mitt romney is there. you're falling all over. paul ryan is over here. what is it, like 4 million people there maybe? >> it starts there as you recall. actually started the whole deal for barack obama back in 2008. >> wow. can i talk about corn? >> yes. >> thank you. go ahead. >> all right. the new report out this morning corn is already jumping on the markets because it was bullish on corn and some traders had been expecting bearish news. they've been selling off corn this week but the usda says stocks as of the beginning of september for the year are 98 # bushels. that is under a billion bushels, very low. 988 bushels. the street was expecting slightly more than 1.1 billion. that is a 12% drop from stocks a year ago with most of it from grain facilities not from the farms.

corn supplies on the farm are only down slightly. perhaps as farmers are holding on to corn to meet contract commitments. soybeans, the market is mixed. it was a bearish report with ending stocks a little higher than expected at 169 million bushels. still, a 21% drop in a year. bullish wheat with stocks as of the beginning of september at a little over 2 billion bushels. only down slightly from a year ago but less than the street expected. we'll have to see how the markets react today. so far corn and wheat have been up. soy has been mixed. corn closer to a three-month low yesterday getting close to $7 a bushel. now we think that's cheap. yesterday a note from waverly advisers said it exited its remaining long positions in corn, quote, the corn position has been remarkably profitable as we've been able to book large gains. >> i remember talking to farmers in july who were stunned it got to $7. >> yes. >> they couldn't believe how high it was. >> $3. >> goldman was talking about $9 and $10 corn. >> what about pigs? >> well, this is going to be

good for pigs. if there is more corn than people. >> but there is a big bacon pig shortage. >> yes. here's the deal. okay? >> what have you got? >> we'll have a glut of bacon in the short term as they slaughter all these pigs. >> we will. >> so you can hoard now. do you know how much you pay for bacon? do you do your own shopping? >> no. >> okay. about $4.60 a pound in the store now. say it goes up 20%. it's like what, $5.50 a pound. you're still going to buy bacon. >> oh, yeah. >> jane wells, thank you. we have breaking news. >> better be good. >> this is good. or interesting at least. tim cooke just releasing -- >> oh, apple. >> a note to, letter rather to consumers apologizing. this is an apologetic note about apple's maps. we talked about it a lot on the show. the maps don't work nearly as well as the previous google maps on their service. in this letter he writes that at apple we strive to make world class products that deliver the best experience possible to our

customers and with the launch of the new maps fell short on this commitment. we are extremely sorry for the frustration this caused our customers and are doing everything we can to make maps better. goes on to say while we're improving maps you can try alternatives. he has actually gone on to say this. by downloading map apps from app store including bing, map quest and waz or use google or nokia maps by going to their websites and creating an icon. this is going pretty far. >> wow. the line where he says the more our customers use our maps the better it will get. >> that is true. he does say they're still working on this and now that 100 million ios users are out there since they've upgraded simply by using these new devices which are tracking where you're going that they'll be able to build better maps themselves. they write that everything we do at apple is aimed at making our products the best in the world. basically we're sorry. tim cook is not, you know, apple traditionally doesn't say we're sorry. >> would steve jobs ever say i'm sorry? >> they did say sorry once

before if i remember correctly. >> not about the holding. >> yes they did. remember they came out a couple weeks after and actually held a press conference to talk about what was then called antenna -- >> oh, yeah. >> first he said it was your fault. >> but this is not really breaking news. >> within the tech world the fact that tim cook is coming out and apologizing. >> it's apple. >> i forgot. roger goodell first. now tim cook. let's bring in jim and david from the new york stock exchange. david, have you been around? cramer, we've been, he's been like the lone ranger. you finally decided to set the alarm today? >> no. i've been here. it's just coming down from that platform over there, on the phone or whatever it is. whereas jim likes to get right down here and get to business here. i settle my business up there. >> dave is making calls on bank of america. this is current stuff. >> i assume you guys have seen it. >> yeah we did. that 2.43 billion. take me back of course to the deal itself, guys.

remember when they had the shareholder vote and then had losses. they came after that shareholder vote. then we found out about the bonuses. they were expected to go to trial october 22nd. this is a huge number. >> all right. >> just, becky, fabulous. you changed everybody's view about r.i.m. a great interview with the first quarter stuff. >> thank you jim. >> i think it's the last day of march. >> i don't know what to do with that. don't know if it's a good thing or not. >> great job. >> thank you very much. >> all right. when we come back we'll present a squawk blue chip award to our guest host. stick around. i'm only in my 60's...

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we are back and proud to present a blue clip award to our guest host. it goes to the smartest guys in the room. the amazing rise and fall of enron. it is one of my favorites. bethany is here with us right now. she is also the author of "all the devils are here" as well as a contributing editor of "vanity fair" and cnbc contributor. she has lots of titles. you've got the award. >> thank you. >> present that to bethany. >> thank you.

>> do you have a library or den? >> no. just a disastrous pile of documents. this is fantastic. thank you, guys. i'm honored. >> i have one question with an answer that can only be five seconds long. what is the next big scandal? >> if i knew that maybe i'd be doing something else. not true. i'm really good at dissecting scandals after the fact. not so good at predicting them. >> thank you very much. have a great weekend, everybody. we'll see you next week. "squawk on the street" begins right now. it is the last trading day of a quarter that belongs to the bulls. markets bouncing back from a disappointing q 2. good morning. welcome to "squawk on the street." i'm melissa lee with carl quintanilla, jim cramer, and david faber live at the new york stock exchange. let's take a look at how we are setting up on u.s. futures after yesterday's big rally. we have the dow looking to lose about 53, the nasdaq down about 9. as for the